CALA CALA Rental Vehicle and Diminished Value Claims 2

Question 1

What is diminished value (DV) in an auto insurance claim?

Accepted Answer

The reduction in a vehicle's fair market value after it has been repaired following a collision

Answer

Diminished value represents the loss in market value a vehicle sustains even after it has been fully and properly repaired, because buyers will pay less for a vehicle with a damage history.

Question 2

What are the three types of diminished value typically recognized in auto claims?

Accepted Answer

Inherent, repair-related, and immediate diminished value

Answer

The three types are inherent DV (stigma from accident history), repair-related DV (from improper repairs), and immediate DV (loss before repairs are completed).

Question 3

Under which coverage can a first-party insured typically NOT claim diminished value under their own auto policy in most US states?

Accepted Answer

Both collision and comprehensive coverages

Answer

Most state courts and insurance policies have held that first-party collision and comprehensive coverages only obligate the insurer to repair or replace the vehicle, not to compensate for residual diminished value.

Question 4

In a third-party liability claim, who can assert a diminished value claim?

Accepted Answer

The vehicle owner whose car was damaged by the at-fault party

Answer

In a third-party claim, the vehicle owner damaged by the at-fault driver can demand diminished value as part of the total damages owed by the at-fault party's liability insurer.

Question 5

What method do many insurers use to calculate inherent diminished value, though it is often criticized as undervaluing claims?

Accepted Answer

17c formula developed from State Farm v. Mabry

Answer

The 17c formula, originating from State Farm v. Mabry, uses a percentage of ACV reduced by damage and mileage modifiers, but critics argue it systematically underestimates actual market value loss.

(CALA) Certified Automotive Loss Adjuster Practice Test

(CALA) Certified Automotive Loss Adjuster Practice Test

CALA CALA Rental Vehicle and Diminished Value Claims 2